Kitzhaber, who is a physican, knows that Oregon's Medicaid program, known as the Oregon Health Plan, is crowding out other state programs that need funding.

In Oregon, the revenue growth is 4 percent a year and the cost of Medicaid is 5.4

percent a year. We just got a huge wiaver from the Obama Adminsitration of an investment of two billion dolaras for reorganizing the financial incentives for our medicaid program. It is estimated to save us 7 billion dollars over the next decade with our new delivery model. If applied to all states, it could mean a savings of 1.2 trillion dollars. If looking to save a million dollars, why not do that while making people healthier?"

The Obama Adminsitration agreed to give Oreogn two trillion dollars in exchange for proeceted cost savings of two percent in Medicaid spending.

If the state fails to realize those savings, Oregon would have to pay penalties.